Why don't dry bulk shipping company stocks do better??
With all the demand for commodies like the grains, why don't dry bulk shipping companies do better stock value wise than the way they just oscillate around a base price??
Answers
2183 points
ChaosNantuko answered one year ago …
I was following Drys a couple months ago, and it seemed to be doing well up until the recent market problems. Thing is, high demand for commodities will retreat significantly if the united states enters a recession, because that will mean less demand for goods originating from other portions of the world, and so less overall bulk shipping occurring as these other parts of the world have less money to spend themselves. That being said, if it becomes widely thought that a recession will not occur, i believe these stocks will outperform the market, especially if they continue to post good earnings.
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2775 points
Oldman answered one year ago …
Part of the runup in share prices early last Summer was due in part to the increase in the BalticDryIndex charter rates...due to the surge in pricing for the bulk commodities especially coal and grains. Then a Chinese shipping Co., at the behest of the Chinese central bank, managed to torpedo the charter rates by selling some charters at loss rates (his losses were underwritten by the Chinese Govt). Suddenly the BalticDryIndex plummeted, to the satisfaction of the Chinese, who were freaked out by the cost to import goods.
The larger dry-bulk shipping companies have mostly recovered from this, and their current pricing is more fairly a reflection of the return to reasonable time/charters. Some, that had 150% price increases from 11/06 to 8/07, have come down in price significantly, but don't represent "good buys" even now. The one's I lke are Genco (GNK), Diana (DSX) and Eagle (EGLE), because they haven't hyped their building plans, and pay very nice dividends, compared to TeeKay and some others. .
This is an example of gov't. influence on a sector. But it won't be able to affect it again, the same way.
